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Pawlenty cuts local aid, some programs to balance budget

Gov. Tim Pawlenty announces Friday that he has eliminated a $426 million budget deficit, mostly by cutting state spending. Behind him is state Finance Commissioner Tom Hanson. (Tribune photo by Don Davis)

ST. PAUL -- State budget cuts are under way. So is the anguish.

Minnesota Gov. Tim Pawlenty on Friday drained the state's budget reserve and chopped away at state payments to local governments, colleges, human services providers and state agencies in balancing the state budget.

The average Minnesotan should notice little change, Pawlenty said.

Major cuts included $110 million from payments due cities and counties, $73 million from human services programs, $40 million from colleges and $40 million from various state agencies.

"Families and businesses across the country are tightening their belts and government needs to do the same thing," Pawlenty said.

City officials were not happy with losing $66 million out of an expected $280 million payment on Dec. 26.

Pawlenty's cuts -- officially known as "unallotment" -- mean cities will receive 22 percent less money than they expected this month, said Tim Flaherty of Coalition of Greater Minnesota Cities.

"Having the rug pulled out from under cities at the last minute is upsetting, especially when we are willing to partner with the state to find a fair, long-term solution," added Wadena Mayor Wayne Wolden, the coalition's president.

Executive Director Jim Mulder of the Association of Minnesota Counties said his members will not complain.

"We understand we have to be part of the solution," Mulder said. "We have decided as an association that we are not going to spend a lot of time complaining. Nobody wants this ... but it is a reality. So let's spend our efforts finding solutions."

As Pawlenty cuts $271 million out of the budget, after using up the state's $155 million budget reserve, counties will lose $44 million of the $165 million they expected.

Aid to cities with 1,000 or fewer residents was not cut, exempting 505 of the state's 854 cities. Counties smaller than 5,000 also were spared any cuts.

Pawlenty -- who under the constitution was required to make cuts -- balanced the state budget without affecting military, veterans, public safety and K-12 education programs.

The Republican governor was forced to make the cuts after a recent report indicating the state otherwise would end the fiscal year on June 30 with a $426 million deficit. Days after that report, State Economist Tom Stinson predicted the deficit could grow up to $70 million more in the coming months, forcing another round of cuts.

Pawlenty would not say what he will do if more cuts are needed early in 2009.

The current budget problem is just part of the whole picture. In total, the state budget is nearly $5.3 billion unbalanced for the next 2½ years.

The Legislature and Pawlenty must work together to balance the next two-year budget once lawmakers return to St. Paul on Jan. 6. It is expected to be about $32 billion.

Behind state aid to local governments, Friday's largest cut was in human services programs. But the Republican governor said few people should notice.

"As much as possible, we have worked to minimize the impact of these cuts by reducing accounts with surplus balances or excess funds that have not been spent or committed to projects," Pawlenty said.

Human services cuts include $28 million from the Medical Education Research Costs account, just a portion of the state's contributions, Pawlenty said.

"There are no good choices," said Rep. Tom Huntley, DFL-Duluth. "However, delaying medical education and research payments will threaten residency programs that are already in fiscal crisis, perhaps even forcing some to close."

Huntley, chairman of the House health finance committee, said programs that most need money are the ones being cut.

With local governments taking a hit, some city officials warned that public safety and other services would suffer.

Pawlenty said some cities, which he would not name, have offices -- such as those supporting human rights or the arts -- that duplicate state functions. Those types of offices should be cut before police and fire departments, he said.

The governor said the cuts to counties amount to less than 2 percent of their budgets and the average city cut would be about 3 percent.

He said such cuts are manageable.

However, Jim Miller of the League of Minnesota Cities said the cuts will affect some cities' public safety efforts.

"It really does vary by city," he said.

"It will be significant in some cases," Flaherty added.

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Mulder said counties understand that changes are needed.

"The governor talked about what we are doing now is not sustainable," Mulder said. "We agree with this. The counties are going to have to change how we do business."

Pawlenty praised the counties' effort to reform, even as he criticized many cities.

For state government, Pawlenty already has ordered his agencies to cut spending 10 percent for the remainder of the current fiscal year. Many vacant state jobs are going unfilled.

House Majority Leader Tony Sertich, DFL-Chisholm, said he understands that Pawlenty had difficult decisions to make, but he said he was not happy with many of those decisions. On the other hand, he added, Democrats are happy that Pawlenty did not nick education funds.

For the most part, Sertich said, it is too early to know how much Pawlenty's cuts will hurt communities. "It will impact different communities different ways."

One of the Iron Range's funds, the 21st Century Minerals Account, was tapped for $1.5 million.

"It is that much less incentive that we can offer a business that wants to grow jobs in Minnesota," Sertich said about the fund that supports northeastern Minnesota economic development.

Sertich also was unhappy with Pawlenty exempting small cities and counties from funding cuts. "You are picking winners and losers."

But the worst decision, Sertich said, was to cut higher education funding at a time when the unemployed need to go back to college.

Pawlenty said the University of Minnesota and Minnesota State Colleges and University system have reserve funds they can use to weather their cuts.

Like he was in an earlier news conference, Pawlenty on Friday was especially tough on Duluth. He said he has received letters from angry Duluth residents for two weeks since his last comments.

He said the city receives more than half of its budget from state payments.

"The rest of the state may wonder why that happens," he said.

Sen. Jim Vickerman, DFL-Tracy, said he was especially happy that Pawlenty preserved veterans' programs. Vickerman is the Legislature's most vocal veterans' supporter.

Vickerman also said he was relieved to hear that Pawlenty would allow small cities to receive their full aid checks. He said he has received more calls on that topic than anything else lately.